1. ACCOUNTING AS THE BASIS FOR MANAGEMENT DECISIONS
CHAPTER 1
ACCOUNTING AS THE BASIS FOR MANAGEMENT DECISIONS
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2. Outline What is Accounting? Users of Accounting Information
Types of Accounting
Organizations
Business Transactions
Forms of Legal Organization
Accounting as an Information System
Financial Statements – Output of the Accounting System

3. The language of business
What is Accounting?
A system for collecting, summarizing, analyzing, and reporting information about an organization……….
in monetary terms.
The language of business

4. ACCOUNTING COLLECTING SYSTEM SUMMARIZING ANALYZING REPORTING
MONETARY TERMS
INFORMATION
ORGANIZATION

5. Users of Accounting Information
OTHER USERS
CREDITORS
INVESTORS
EMPLOYEES
OWNERS
GOVERNMENT
UNIONS
FOCUS ON MANAGEMENT
MAIN USER OF
ACCOUNTING
INFORMATION

6. Types of Accounting Financial Accounting Managerial EXTERNAL USES OF
ACCOUNTING INFORMATION
(financial statement creation)
Financial
Accounting
Managerial
INTERNAL USES OF
ACCOUNTING INFORMATION
(budgeting, performance control)
Both rely upon the accounting system

7. Organizations Distinct Entities
A person or persons with stated purposes
Operating in an environment by interacting with other organizations
Each gear is a distinct entity, but they work together.

8. Business Transactions
Interaction between organizations
Quid Pro Quos
Equal Exchange of values
Values Received Equal Values Given
Services = Payment

9. Forms of Legal Organization
Sole Proprietorships
Partnerships
Corporations

10. Forms of Legal Organization : Sole Proprietorships
One owner
No sharing of profits
Simple to set up
Questions of taxation
Limited life
Unlimited liability

11. Forms of Legal Organization : Partnerships
Easy to set up
Combination of capital and experience
Questions of taxation
Limited life
Unlimited liability
Mutual agency P

12. Forms of Legal Organization: Corporations
Expensive to set up
Limited liability
Unlimited life
Easy to transfer ownership
Access to capital for expansion
Double taxation
More government control

13. Accounting as an Information System
INPUT PROCESS OUTPUT
SOURCE ACCOUNTING INFORMATION
DOCUMENTS CYCLE TO MANAGEMENT
Financial Statements

14. Financial Statements-Output of the Accounting System
Source Document Process Output
Balance Sheet
Income Statement
Statement of Cash
Flow